April 10, 2009


Updated: 47 minutes ago
BY ROBERT E. KESSLER |
robert.kessler@newsday.com
Holtsville restaurateurs guilty of tax evasion

10:23 PM EDT, April 10, 2009
Three brothers who operate the popular Mi Tierrita restaurant chain pleaded guilty Friday to evading income and payroll taxes on $10 million in cash that they took in between 2003 and 2008.

The Pabon brothers - Juan Carlos, Eduardo and Fernando - also pleaded guilty as part of plea bargains in U.S. District Court in Central Islip to knowingly employing more than 50 people at the restaurants during the same period who did not have authorization to work in the United States. The three brothers live in Holtsville.

The eateries, in Patchogue, Brentwood and Hempstead, specialize in Colombian food.

The Pabon brothers, speaking through a Spanish interpreter, said little except to admit their guilt during the proceedings before U.S. Magistrate Kathleen Tomlinson.



After the pleas, the brothers' attorney, Patrick O'Connell of Central Islip, declined to comment, as did Assistant U.S. Attorney Charles Kelly.

During the pleas, Kelly said that the brothers' scheme involved pocketing the $10 million in cash receipts "right from the safe." The brothers kept the cash as unreported income, or used it to partly pay their workers without paying the required additional amount in payroll taxes, Kelly said.

Kelly said the scheme also involved knowingly using undocumented workers. Kelly credited both the Criminal Investigation Division of the Internal Revenue Service and Immigration and Customs Enforcement for uncovering the scheme.

According to court papers, Juan Carlos Pabon earned $1,361,429 in 2006 and should have paid $449,711 in federal income taxes. But he reported earning only $238,341 and paid $65,595 in taxes.

Eduardo Pabon earned $1,309,979 that year and owed $431,743 in taxes, according to court papers. But he only reported an income of $184,163, paying $46,287 in taxes.

Fernando Pabon earned $304,343 in 2006 and owed $80,415 in taxes, according to court papers. He reported, however, earning only $41,682, and paid $5,496.

As part of their plea bargains, the Pabons each face 30 to 37 months in prison, repayment plus interest on taxes they failed to pay, and a $150,000 fine.

In October, the state Department of Labor announced the chain had agreed to pay $659,341 in back wages, damages and civil penalties to about 50 workers. The restaurants paid some service employees as little as $2.08 an hour, the department said. The state minimum wage is $7.15 per hour and $4.60 per hour for food service workers who receive tips.

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